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Internet opportunities for tire retailers: Reduced costs, increased customer knowledge are just two advantages spun off from the Web

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Internet opportunities for tire retailers: Reduced costs, increased customer knowledge are just two advantages spun off from the Web

The whirlwind of the Internet is transforming the business landscape in every industry it touches, from books to cars, from raw material producer to finished goods manufacturer to end user/consumer.

The evolution of the Internet has moved the fastest in business-to-business relationships, especially in the realms of inter-business communication and supply chain management through reduced turn-around times and improved supply optimization. On the consumer side, the Internet has had an enormous impact on shopping and commerce through improved consumer education and transaction efficiency, among other things.

From a retailer standpoint in the tire industry, the Internet presents both significant challenges and opportunities for competitive survival and commercial exploitation. In searching for ways to address the Internet for the retailing of tires, we should look at how the Internet applies to the industry and what lessons can be drawn from other industries that are useful in paving our own way forward.

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What is the Internet?

The Internet is an electronic environment that connects market participants across the entire world and through which are allowed to interact by way of software that automates human activities.

The principal Internet tools that people use in business at all levels are e-mail and messaging applications, Web sites and inventory control systems. E-mail allows for the use of software for institutions, businesses and consumers to communicate quickly and efficiently over long distances. Web sites allow for the use of software to automate many different things including the information sharing, the shopping and purchase process, customer service, and promotional communications. Inventory control systems automate the flow of demand information throughout the value chain and ensure the timely delivery of product to the point-of-sale.

What the Internet does

What are the most significant impacts of the Internet on business? The first major impact is to eliminate the cost of geophysical boundaries. Because the Internet is an electronic environment, every participant is just one electronic blip away. Whether in Ohio, California or Kuala Lumpur, Malaysia, the distance between participants is no more than one mouse or keyboard click away. The importance of location thus becomes far more industry-specific than in the past.

We have learned from many entrepreneurial attempts in many industries that groceries are a neighborhood event while buying books is a global experience.

The second impact of the Internet has been to change the products people buy from things to experiences. The industries experiencing the most dramatic shift in product are those that provide easily digitized items that can be delivered online such as software, music, books, magazines, newspapers and movies. All of these related businesses are undergoing collapsing market capitalization as consumers and businesses switch to digital versions from traditional versions of these products.

In other industries the physical product is being separated from the associated services that enable use of the product. This is true in the tire business where online retailers like The Tire Rack (www.tirerack.com) sell tires directly to consumers who then contract with local retailers for balancing and installation.

The third impact of the Internet is to reduce both prices and costs. Because it is so easy and cheap to share information, the cost of finding information is almost zero. Alternative suppliers are thus just one click away or just one Google search away, so finding cheaper prices, whether wholesale or retail, is incredibly simple. Search engine Web sites like Google have become a replacement to the Yellow Pages, the public library and the manufacturer's catalog all rolled into one, creating significantly better informed buyers who have discovered that they have a near infinite number of choices and the ability to find the lowest price anywhere in the world from their desk.

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The fourth impact of the Internet is to shift most of the work of providing service to the customer while dramatically reducing the cost of the service. Self-service Web sites and automated inventory control systems make it easy for customers, whether wholesale or retail, to find out their order status, resolve billing problems, schedule delivery and installation or check on product availability and place orders all on their own. And they can do this from their office or their home at 2 p.m. in the afternoon or 2 a.m. in the morning without the service provider having to staff a phone or an office.

From just these four impacts, we see that the Internet expands the number of competitors, changes what businesses and people buy, changes how people and businesses shop and purchase products, reduces prices and costs, and allows customers to self-serve at times and locations of their own convenience.

The Internet and the retail value chain

Since the advent of the Internet, any of the participants in the market, including wholesalers, distributors and manufacturers, may deal directly with consumers as do retailers. However, tire buyers are in need of more than just product. They require balancing and installation, routine rotation, and maintenance. For this, like most commercial customers who often deal direct with manufacturers or wholesalers, consumers still require the services of a local provider to deliver these services.

In addition, consumer research on Web purchasing of tires has shown that this requirement of service is often associated with a level of comfort regarding both the quality of the product purchased and the safety of the installation. Thus retailers maintain a competitive advantage over manufacturers and distribution network participants in that they have a location advantage with buyers that is difficult to overcome using the Internet. Tires themselves become commoditized, but the value of installing and managing maintenance remain with the retailer.

Internet opportunities for independent tire retailers

Where are the opportunities for tire retailers with the Internet? There are two sides to consider: a demand side driven by the needs of the consumer or buyer, and a supply side driven by the needs of the seller.

The objective of the demand side of the value chain is the increasing of sales and profits through customer acquisition, retention and expansion of the relationship through the provisioning of new and additional services. On the supply side, the objective is to reduce costs and improve fulfillment performance through improved efficiency and integration.

How does the Internet deliver on demand and supply side opportunities? From other industries a list of activities that can be automated through software has been developed and can be applied to the tire industry.

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Supply side opportunities

As noted, the goal of supply side opportunities is to reduce costs and improve fulfillment performance through improved efficiency and integration. Key activities that can deliver these benefits include:

* order management;

* pricing;

* Fulfillment management and tracking;

* billing;

* adjustment tracking;

* customer service;

* advertising support; and

* online training.

In addition to these activities, retailers can be supported by their suppliers, whether manufacturers, wholesalers or distributors, with communications about product and market information, specials and other information that will help them sell more tires and be more efficient. Other opportunities can yield significant benefit through blogs, which are online musings of industry experts, engineers and managers who can provide insight into the products, their performance, how to manage improve on managing the sales floor, hiring and other HR issues and other topics that retail owners and managers can read and from which they can pick up tips and learn ways to better manage their businesses.

In addition, suppliers can host discussion boards where tire retail store owners and managers can ask each other questions, share their own experiences and discuss ways to improve the performance and profitability of their sales and shop floors.

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Demand side services

As noted, the objective of demand side opportunities are to increase sales and profits through customer acquisition, retention and expansion of the relationship. Key activities that the Internet can support to achieve these goals include:

* online ordering of tires;

* appointment scheduling;

* maintenance and service tracking with email reminders;

* links to tire and automotive educational resources;

* discussion boards on cars, driving, community activities and other events that the retailer can connect its customers to;

* and online games, contests and promotional events that spur participation with the retailer's brand by the consumer.

In addition to these, the Internet offers retailers the ability to communicate with customers routinely about product care, promotions and sales and other marketing communications.

An online service that can help to build the retailers brand with consumers, especially younger consumers, is to host a Web site that allows for social networking and personal Web pages much like MySpace and FaceBook do. The retailer can build brand loyalty among local consumers by hosting local car shows and youth-oriented automotive events that the young people can then extend onto the retailers online site by posting photos of their and their friends' cars, sports and other activities.

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Summary

The Internet offers tire retailers significant opportunities to reduce cost, improve efficiency, improve sales, increase profits and improve customer satisfaction. In our next article we will explore indepth the supply side opportunities and who is currently providing them in the tire retail industry.

Major impacts of the Internet: Technology has changed business climate

The advent of the Internet has changed the way tire dealers do business, says researcher and digital marketing lecturer Michael Schiller.

1. It eliminates the cost of geophysical boundaries.

2. It changes the products people buy from things to experiences.

3. It reduces both prices and costs.

4. It shifts most of the work of providing service to the customer while dramatically reducing the cost of the service.

There are two sides of the Internet's "value chain," he adds, a demand side driven by the needs of the consumer or buyer, and a supply side driven by the needs of the seller. The objective of the demand side is increasing sales and profits through customer acquisition, retention and expansion of the relationship through the provisioning of new and additional services.

On the supply side, the objective is to reduce costs and improve fulfillment performance through improved efficiency and integration.

Michael Schiller is a principal with the brand strategy and research firm of Schiller, Benson and Polo of Cleveland, Ohio. He also is an assistant lecturer on the subject of digital marketing at the University of Akron (Ohio).

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